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Strapped for cash, the trusts called in margin loans from stock market speculators.
though the Stock Exchange was twenty paces from his office, Pierpont didn’t know its hours: stock trading was vulgar.
With his peculiar bifocal vision, he saw the panic as a time for both statesmanship and personal gain.
As people hoarded money and banks called in loans, there was no central bank to instill confidence or offset the sudden credit contraction. Sharp drops in the money supply then led to severe recessions.
From the ashes of 1907 arose the Federal Reserve System:
President Roosevelt now recommended federal regulation of the stock exchanges, while New York governor Charles Evans Hughes wanted margin requirements raised from 10 to 20 percent. If these suggestions had been enacted, the country might have been spared some of the lurid excesses of the 1929 crash.
system of twelve private regional reserve banks be placed under a central political authority, a Washington board that would include the Treasury secretary and presidential appointees.
William Howard Taft took office in 1909,
He felt convinced Taft would water down the troublesome Sherman Antitrust Act.
The Baronial Age was one of unbridled laissez-faire, marked by often unqualified hostility on the part of bankers toward government.
The threat of military intervention was an excellent means by which to speed loan repayment.
He spent much of his time in Europe, escaping the din of Progressive politics.
wholesale development of Alaska became a test case of the government’s attitude toward wilderness areas.
full-blown scheme for entering publishing.
the moves reflected a new wish to shape opinion
In December 1913, President Wilson signed the Federal Reserve Act, providing the government with a central bank and freeing it of reliance on the House of Morgan in emergencies;
a hybrid institution, with private regional reserve banks and a public Federal Reserve Board in Washington.
With his New England sense of self-reliance, he didn’t think it sporting or fair to blame one’s parents for one’s troubles;
children identify with parents to relieve their fear of them,
On Christmas Eve, Jack perpetuated the ritual of reading to Morgan children from Dickens’s Christmas Carol—using the author’s own manuscript.
Jack joined Lamont in an anonymous donation to Britain’s National Trust to buy the land surrounding Stonehenge, saving the area from development.
On December 23, 1913, President Wilson signed the Federal Reserve Act.
the dollar plunged—making repayment more expensive
the Gentleman Banker’s Code, the need to maintain civility on the surface.
With the big syndicated loans, one couldn’t antagonize a powerful bank that might be an ally on the next issue.
the United States entered the war, on April 6, 1917,
the House of Morgan were entangled by the Treaty of Versailles and the problem of German reparations.
the French were implacable about receiving massive compensation.
John Maynard Keynes, in his famous polemic The Economic Consequences of the Peace, gave the Germans the impression that they had been penalized and thus only fostered their resentment and weakened their resolve to pay. This, he thought, paved the way for Hitler’s rise.
By November 1919, the Treaty of Versailles was dead in the Senate, and Wilson was a shattered man. The United States never joined the League of Nations.
As exponents of global cooperation, the House of Morgan would often feel uncomfortable with the isolationist Republicans.
The rich grew alarmed by events in Russia—the seizure of power by Trotsky and Lenin, the assassination of Czar Nicholas II, and the Bolshevik repudiation of foreign debt.
To curb the inflation that followed the war, Ben Strong of the New York Fed raised interest rates sharply. It was the first recession deliberately engineered by the Fed to moderate a boom.
unemployment quintupled to 12 percent,
Office of Strategic Services, the forerunner of the CIA.)
Then came the blast of September 16, 1920.
He saw Jews as a global fifth column feigning loyalty to host governments while furtively advancing foreign plots.
the Jew is always a Jew first and an American second, and the Roman Catholic, I fear, too often a Papist first and an American second.
His favorite expression was “easy does it” and his son, Corliss, said he never saw his father angry. He had a staggering capacity for work, and his voluminous papers at the Harvard Business School resemble the work of ten busy men. Tom Lamont was a prodigy—in business, finance, and diplomacy—and his career, dazzling in scope, would rival that of Pierpont Morgan himself.
the New York Fed engineered the 1920 recession.
Pierre du Pont emerged from retirement to become president of General Motors, a position he held until Alfred P. Sloan, Jr., replaced him three years later.
DURING the 1920s, a cash-rich America embarked on a binge of buying foreign bonds,
Republican president, Ohio newspaper publisher Warren Harding,
The paradox of the Roaring Twenties was that three free-market Republican administrations would confer new, semiofficial status on foreign lending, assuming the right to veto loans—something no Democratic administration would have dared to do, lest it be accused of socialist tendencies.
The driving force behind the new loan policy was Secretary of Commerce Herbert Hoover.
Jack Morgan pledged to Harding that the bankers would “keep the State Department fully informed of any and all negotiations for loans to foreign governments which may be undertaken by them.”44 For a pro-business administration, it was an astounding extension of governmental power.
During the Republican-dominated 1920s, bankers probably attained their peak of influence in American history.
Hiding behind Wall Street banks, the government could disclaim responsibility when countries were approved or rejected for loans.
It also provided the banks with government intelligence about debtor states.
Wall Street confronted that ageless problem of how to enforce payment from sovereign states. Washington seemed to be the answer.
